Correlation Between Equillium and Connect Biopharma

Can any of the company-specific risk be diversified away by investing in both Equillium and Connect Biopharma at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Equillium and Connect Biopharma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Equillium and Connect Biopharma Holdings, you can compare the effects of market volatilities on Equillium and Connect Biopharma and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Equillium with a short position of Connect Biopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equillium and Connect Biopharma.

Diversification Opportunities for Equillium and Connect Biopharma

-0.25

Correlation Coefficient

Equillium  Connect Biopharma

Very good diversification

The 3 months correlation between Equillium and Connect is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Connect Biopharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connect Biopharma and Equillium is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Equillium are associated (or correlated) with Connect Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connect Biopharma has no effect on the direction of Equillium i.e., Equillium and Connect Biopharma go up and down completely randomly.

Pair Corralation between Equillium and Connect Biopharma

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.24 times more return on investment than Connect Biopharma. However, Equillium is 1.24 times more volatile than Connect Biopharma Holdings. It trades about 0.05 of its potential returns per unit of risk. Connect Biopharma Holdings is currently generating about -0.03 per unit of risk. If you would invest  71.00  in Equillium on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Equillium or generate 7.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Equillium  vs.  Connect Biopharma Holdings

Equillium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Connect Biopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Equillium and Connect Biopharma

The main advantage of trading using opposite Equillium and Connect Biopharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equillium position performs unexpectedly, Connect Biopharma can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Connect Biopharma will offset losses from the drop in Connect Biopharma's long position.

The idea behind Equillium and Connect Biopharma Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.